New Xero shareholder sees role for SaaS and software

Traditional software will have its place for some time, says Craig Winkler

Xero founder Rod Drury talked confidently last night of the old PC-resident accounting software “handing over the baton” to new SaaS-style applications, but for new major shareholder Craig Winkler things aren't so clear-cut.

There will be a role for both for some time yet, he says.

“Internet delivery is certainly the next wave,” he says “and Xero is out there doing it; that’s great.

“It’s a market where there are always going to be a number of players and from my perspective the ones that do the right thing by their clients, that really look after their interests deserve to continue to succeed. Xero’s doing that and they’re carving out a space.”

Winkler is also cautious about echoing Drury in saying the basic Xero platform will have been completed with the multi-currency version to be released in the next month and it is time to start thinking about what might be layered on top.

“It’s getting there,” he says.

Shareholders last night unanimously approved Winkler, founder of the PC-based MYOB accounting suite, and unspecified “associates” acquiring 20 million newly issued shares of Xero stock at 90 cents a share. This injects $18m into the company.

Xero concurrently announced its 2008-9 results, featuring a sevenfold lift in revenue but increasing losses, at $6.7m, arising from continuing investment in people and resources.

Drury sees the next layer for the suite of products tackling front-office tasks: “expense claims, job accounting, time accounting, anything that’s employee related; those are the natural things to do; we’ve got lots of partners providing vertical industry solutions,” he says.

Once Xero announced the deal with Winkler, it was approached by a number of Australian software companies with such applications looking to interface with an accounting back end.

“There seems to be a lot of pent-up demand,” Drury says. “Rather than having to generate a file and upload it to the desktop, they will just fire it into Xero.” The strategy in Australia will be to work with such independent software vendors.

“Australia kicks off with the Telstra marketing programme in July,” he says.

In the US market, Xero will have to fit with local needs and concerns, Drury says.

“We’ll put a couple of people in San Frascisco to start looking at that.” he says. “It won’t be the accounting system as such, it’ll be how do we cope with 401K [employee retirement savings], with tax filing and so forth – looking at all the interface points, so when we hit the US market we feel like a US product.”

Release to the US should come before the end of the year, Drury says.

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